LIFE SPAN – 2011.08.10 – Fire, Riots & Remedies

LIFE SPAN 2011.08.10

Situational Policy Analysis & News from LIFE

Situation – No Growth without Fire

The industrial world is trapped, surrounded by a ring of fire. The only way forward for them is to “grow their economies”, but they are finding that they cannot grow. They cannot grow for two reasons, a double ‘liquidity’ trap:

Their economies are based on oil, and every time it looks like growth might be picking up, the price of that liquid shoots up and sucks the gas out of the engine, so to (s)peak.

There is insufficient ‘demand’ (i.e. people can’t afford to, or won’t, buy).

Today’s industrial economies everywhere are hydro-carbon economies: they are reliant for the majority of their power on oil, gas or coal (except France at 78% nuclear – see SPAN 2011.05.01). The supply of these non-renewable resources is constrained and possibly dwindling, so whenever the expectation is that industrial economies will grow the price of these energy resources goes up, the higher the expectations are for growth the higher the price of the energy. Basically we are in a trap, the cost of growing is too high and any wealth generated by growth is syphoned off to the sellers of oil, gas and coal.

Demand growth is non-existent because wealth-creating production has been separated from wealth-spending consumption. Production is now located in economies that cannot afford to consume the output, and the proposed consumers are located in economies that are no longer producing sufficient wealth because the production has been relocated to somewhere where people can afford to consume even less. This is true of Germany, USA and just about every other industrial “economy”. So, on top of the heavy debt burden that people (aka “consumers”) in the developed nations have assumed, their means of wealth generation has been removed.

There are two options proffered by the old, left of center traditions: increase government spending and borrowing to increase aggregate demand, and increase the supply of money so that money is so cheap it will be worth investing in almost anything rather than have it lying idle. Both of these have been tried in the current situation and both are failing. Governments and people are already so debt laden than they cannot borrow any more without reaching evidently beyond their capacity to repay, so they cannot spend any more without raising taxes, meaning that they would not be increasing aggregate demand. The second option of increasing the money supply has already been done as much as it possibly can be, and now central banks are tapped out and in a ‘liquidity trap’ (where printing more money does nothing, and interest rates cannot be lowered because they are already at 0%).

The situation is terminal. Without growth in demand, there cannot be growth in the economies; and without economic growth pretty much every nation’s debts are unserviceable and, therefore, so is the entire world financial system. This is a serious situation: for the last 100+ years we have been investing the security of our civilizations in the development of an internationally and intercontinentally accepted trading system (aka ‘finance’). We need a way out of this before too many people notice the emperor has no clothes, otherwise our common advances in civilization will be set back by more than a few riots. This is not to say that we should save the bankers, far from it! But we can transition peacefully to sustainable prosperity, if we decide to – it takes more work and greater courage than sitting back and watching it all burn down, but that’s what being civilized is all about.

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Policy – Fighting Fire with Water

There are two ways to grow without running straight into the fire:

Unleash the internal markets in our local and regional communities.

Decarbonize our infrastructure.

Deliberate policies focused on these two objectives will deliver wealth-producing growth in the economies and societies that have the foresight to enact them. And the industrial societies are best placed to engage in them.

The water that will nourish our local communities is symbolized by water itself: water is a natural resource that everyone recognizes as being the free entitlement of everyone else, to procure in sufficient quantity to sustain their life. Through this easy example we reveal to ourselves that we all believe that everyone else has the right to the bare necessities of life. Now if we take that insight as a principle, we can easy develop a social structure that embodies it as policy, and in so doing we unleash the natural microeconomic potential of our societies to generate wealth. There is no such thing as unemployment, there is only wasted time.

The most urgent task in front of us is also where we will be able to generate the greatest wealth: developing and modernizing the infrastructures on which our civilization stands. We have much work to do to simply achieve the basics of clean water for everyone and renewable energy for all; these two endeavors will keep a generation busy in productive work.

But both of these simple turns require that we deliberately develop policies in our societies that make them a priority and a reality. That means having governments aligned with them, and that means electing representatives who will ensure they are the priorities. Are you waiting for someone?

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Analysis – A Bonfire of the Polities

The riots in London, the student protests in Chile, the drug wars in the Americas, the uprisings in the Middle East and the protests in China all point to the same chasm separating the ruling polities and the politics of the people. Even in the most established democracies we have disjointed the interests of the ruling classes and the interests of everyone else. To see the politicians consistently and continuously act against the interests of the great majority of the people they purport to represent, you’d think that they’d have to lie to get elected!

Here’s a sampling is widely held opinions in the populaces of today’s industrial ‘democracies’ that the elected politicians don’t seem be able to bring themselves to enact:

we shouldn’t be imprisoning people for taking drugs

better quality education needs to be more widely available and more accessible by all

nuclear power is just too dangerous and too badly managed to be better bet than renewables

we need to do big things to decarbonize our infrastructures now

the banks should be working for the people, not the other way around

banks that go bust, should go bust

there should be more social services universally available, especially medical care

more local control

more responsive, accessible and accountable politicians

no wars, no arms trading, no nuclear weapons

more freedom and better information

There is a basic disconnect between the people and their politicians, and lot of that has to do with scale – the world’s population has multiplied many times over and we are still using the same government structures we were 100 years ago. Without multilayered democratic structures we cannot have accountable representation.
Fixing the disconnect is going to mean making big changes to the way we organize ourselves and our politics, so we have to be prepared to make big changes. We are going to have give up on our “not as bad as the other guy” voting, we are going to have to accept that we are all in this together and we are going to have to grow into our full responsibility for each other and the planet that homes us. Many of our tired attachments will have to go onto the bonfire if we are to escape the backdraft. Burn, baby, burn! It’s OK, it wasn’t working any way… time to try something new.

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News – LIFE Party launching in the UK in 2012

Starting next year the LIFE Party will launch in the UK to run for the 2015 General Election – to win! We will be looking for strong local candidates to stand in every constituency on a LIFE Party ticket to bring responsive politics to every corner of the land that is the grandmother of democracy. To be part of the movement that will bring sustainable prosperity to the UK and then the rest of the world, send an email to uk@lifeparty.org and we will keep you informed of developments as they happen.

This the second issue of the newsletter from LIFE: Situational Policy Analysis and News (SPAN). LIFE SPAN is published online and provides more in-depth coverage of situations at the forefront of public policy at the current time.

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